One of the dominant themes of the 2012 holiday season was that it wasn't enough for brick-and-mortar retailers to honor the prices offered by their brick-and-mortar rivals, they also had to match online competitors like Amazon.com.
Target was one of the major retailers offering a holiday price-matching program, and Tuesday the discount retailer said its price-matching pledge won't end with the holiday season.
"We know that our guests often compare prices online," CEO Gregg Steinhafel said in a press release.
In fact, Target makes it easy for its customers to do so while they shop. The retailer offers free WiFi in its stores, making it easier for consumers with smartphones, tablets or laptops in tow to price compare in store.
Many analysts and retail watchers alike aren't entirely surprised by the decision to make the program permanent and they assume others will follow.
Under the program, Target will match a price when a customer buys an eligible item at one of its stores and finds the same item at a lower price in the following week's Target circular or in a local competitor's printed ad. It will also match the price if the customer finds the same item at a lower price within a week on Target's website or the websites of Amazon, Wal-mart Stores, Best Buy and Toys 'R Us.
"I am not surprised that Target is extending its online price match program, it's a necessary evil to offer your customers in today's world where price matching is so easy," said Deutsche Bank analyst Charles Grom.
The big question though that remains for many investors and analysts is the impact on margins.
Susquehanna Financial Group analyst Bob Summers said, if a retailer is going to match price-to-price, it better get the cost structure aligned. Target is probably well-positioned with its costs, he said, but added he wants to dig further into the financials in the wake of the announcement to make a full assessment.
"On the margin front, relative to Walmart, Target's prices are pretty close, but they are exposed to Amazon, particularly in electronics and toys, which is part of the problem for them during the past few holidays," Grom said.
The other issue is many retailers have a lot to do to better integrate their physical and online businesses.
"These brick-and-mortars need to do a better job boosting their online presence," Summers said. "[A retailer's] online effort can't just be a holiday phenomenon. If you are trying to build traction with your website, you have to be priced appropriately."
Anecdotally, many retailers will, and have been, price-matching online competition, but the consumer has to take the initiative and often speak to a manager to secure approval. (Personally, I know I've had Best Buy match Amazon.com prices before the retailer ever officially announced its holiday program last year.)
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